800,000 Who Bought Obamacare Got Wrong Tax Information

People who face penalties for not having coverage get another chance, while those who had it are encouraged to wait to file their taxes.

About 800,000 people who got their health care through the federal marketplace received false tax information, federal officials said Friday during a press call in which they also announced a special enrollment period for others who didn’t realize they'd face a tax penalty for not having insurance.

Officials from the Centers for Medicare and Medicaid Services said about 20 percent of taxpayers who had coverage through Healthcare.Gov in 2014 and received tax credits to lower their premiums will soon receive an updated tax form for reporting those credits because an earlier form misstated premium amounts. The agency said it will be notifying those people immediately and encouraged them to delay filing taxes until they receive the correct information.

The agency acknowledged that the error will increase tax liability for some, while others could owe less. It's unclear how many people will fall into the former and how many will be included in the latter. Officials would not say how the error occurred but estimate that 90 to 95 percent of the 800,000 taxpayers have yet to file.

In addition, a special enrollment period will run from March 15 to April 30 for people who certify that they “first became aware of” tax penalties for not having insurance after the end of enrollment, which closed Feb. 15, and they already filed their 2014 tax return and paid the fee for not having health coverage.

A number of states operating their own exchanges are expected to offer similar extensions beyond short offers to those who were already in the process of buying coverage when enrollment ended. Among them is Minnesota, which still faces technological challenges and questions about spending practices.

What federal officials call the “Shared Responsibility Payment” is part of the Affordable Care Act’s individual mandate, which experts say is an integral part of expanding coverage and ending rules on pre-existing conditions because otherwise younger, healthier people would likely go without coverage, making insurance pools unmanageable.

The penalty for the 2014 tax year is the greater of $95 or 1 percent of income. For 2015, the penalty is $325 or 2 percent of income, whichever is greater. It will continue to ratchet up in later years.

But it’s also likely that many people will find they qualify for an exemption from the mandate. In addition to exemptions for “religious conscience,” affordability (if premiums cost more than 8 percent of household income) and many others, there are also “hardship” exemptions, which range from homelessness to experiencing the death of a close family member to experiencing a natural disaster.

Democrats have long worried about the political fallout of the tax penalty and have called for an extended sign-up period. Republicans immediately seized on the tax-error announcement as evidence that the ACA is unwieldy. “Surprise, surprise, the Obama administration still does not have its act together,” said Rep. Marsha Blackburn, a Republican from Tennessee who serves as vice chairwoman of the House Energy and Commerce Committee, in a statement. “Not that we needed it, but this is just more proof why Obamacare's insertion of the IRS into the health care decisions of Americans was a colossal blunder.”

The new enrollment period will also add to the 11.4 million people who selected plans through Healthcare.Gov by the deadline, which exceeded a goal set out by the Obama administration but came short of predictions from the Congressional Budget Office, which provides non-partisan analysis.